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August 12, 2015

In June, Allergan, Inc. and Allergan Sales, LLC filed suit against Ferrum Ferro Capital, LLC and Kevin Barnes ("FFC") in the U.S. District Court for the Central District of California, alleging that FFC attempted to extort Allergan by misusing the Inter Partes Review ("IPR") process established under the Leahy-Smith America Invents Act, and that FFC's misuse of the patent system constituted attempted civil extortion and malicious prosecution under California law and also violated California's Unfair Competition Law. On Monday, FFC moved to strike Allergan's complaint under California's "anti-SLAPP" (strategic litigation against public participation) statute (California Code of Civil Procedure § 425.16), which FFC indicates is a creation of state law that "protect[s] defendants from interference with the exercise of their constitutional rights, particularly the right to petition the government" (emphasis in original).

In the memorandum accompanying its motion to strike, FFC contends that the only reason Allergan filed suit was to retaliate against FFC for filing an IPR petition with the U.S. Patent and Trademark Office's Patent Trial and Appeal Board to invalidate an Allergan patent (U.S. Patent No. 7,030,149). FFC argues that because Allergan filed suit against FFC as retaliation for "FFC engaging in the fundamental First Amendment right to petition the government," the first requirement of the anti-SLAPP statute is satisfied. FFC also argues that "[s]ince there are sound legal arguments to support FFC's position that Claim 4 of the '149 Patent is non-patentable as obvious, Allergan cannot demonstrate a probability of prevailing," and therefore the second requirement of the anti-SLAPP statute is satisfied.

With regard to the first requirement, FFC argues that its IPR petition is "clearly protected conduct." FFC indicates that:

[It] is a venture fund focused on the strategic deployment of capital towards socially beneficial ends. One of the company's core social interests is expanding the availability of lower-cost pharmaceutical products for senior citizens suffering from debilitating medical conditions such as glaucoma. While FFC is currently not directly in the business of distributing pharmaceuticals, it looks for opportunities where it can apply its capital to create opportunities to promote its core principles while still obtaining a return on its capital.

FFC continues by stating that "Allergan presently holds the exclusive rights over its tellingly named drug, Combigan, which merely combines two other drugs (brimonidine and timolol) to treat glaucoma," and asserting that "[u]nder a belief that Allergan's Combigan patents are obvious and therefore invalid," FFC filed an IPR petition for the '149 patent. FFC indicates that:

If the IPR proceeding is successful, Allergan's artificial monopoly on this market would be lifted, allowing other generic producers, including producer(s) financed by FFC, to make and distribute affordable solutions to patients seeking a cost efficient solution to their ailment, thereby satisfying Ferrum Ferro's core missions of reducing the cost of pharmaceutical products for senior citizens suffering from debilitating medical conditions.

As for Allergan's motivation in filing its complaint, FFC argues that:

Plaintiffs filed this action with the specific intent of censoring Ferrum Ferro's petition, or to pressure Ferrum Ferro into dropping its case. Their motive? To protect Allergan's artificial monopoly that has allowed it to extract a premium price for the mere act of combining two known medications into a single solution. Using threats of civil litigation as a means of intimidating people from petitioning their government as Plaintiffs has done here is the precise conduct from which California's Anti-SLAPP statute seeks to shield speakers.

With regard to the second requirement of the anti-SLAPP statute, and in support of its assertion that "[a] reasonable person reviewing all the facts could conclude that claim 4 of the '149 patent is obvious and therefore nonpatentable," FFC states that "after carefully reviewing evidence as presented in district court, an esteemed judge of the Federal Circuit, in a strongly worded opinion, stated that claim 4 of the '149 patent is indeed obvious and therefore nonpatentable and invalid." FFC's reference is to Judge Dyk's concurring-in-part and dissenting-in-part opinion in Allergan, Inc. v. Sandoz Inc., 726 F.3d 1286 (Fed Cir. 2013). FFC also notes that the standard before the Federal Circuit (clear and convincing evidence) is higher than the standard before the Board (preponderance of the evidence), and therefore asserts that "the defendants were unsuccessful [in the Allergan, Inc. v. Sandoz Inc. case] because they were required to prove by clear and convincing evidence that claim 4 of the '149 patent was obvious" (emphasis in original). FFC declares that:

Understandably, Allergan would prefer to avoid defending its patent in the face of this lower standard of proof. Allergan understands there is a statistically significant probability that FFC will prevail on its claims. Accordingly, to retaliate for FFC's [IPR] petition, and to bring collateral pressure on FFC to drop its case, Allergan seeks to distort the law and allege claims that have no basis in order to prevent the Inter Partes Review from proceeding.

FFC adds that:

Rather than defend the IPR, Allergan followed its usual modus operandi by resorting to aggressive litigation in district court to keep treatments out of the eyes of under-insured patients, while maximizing their own profits. In doing so, Plaintiffs make the extraordinary assertion that petitioning the government for an Inter Partes Review constitutes "extortion," "unfair competition," and "malicious prosecution."

In a footnote, FFC continues:

It is ironic that Allergan calls [FFC's] actions "extortion," when Allergan itself makes its profits by trying to artificially inflate the costs of glaucoma treatments. Allergan combined two drugs that already existed, and despite the obviousness of this "invention," if a suffering patient can’t afford Allergan's "patent premium" then as far as Allergan is concerned, that patient should simply go blind. Despite this being the true narrative here, Allergan has the audacity to use the word "extortion" to describe Defendants' quest to bring these treatments to under-insured patients for a lower cost. Perhaps the senior citizens currently unable to see because Allergan blocks their ability to afford sight-saving treatments would have another word for it.

On the specific claim of extortion, FFC argues that Allergan cannot show that FFC wrongfully obtained Allergan's property by threatening to do an unlawful injury to Allergan or Allergan's property, and therefore cannot succeed on its attempted civil extortion claim. As for Allergan's unfair competition claims, FFC argues that "[i]f the underlying act is legal, then one cannot impose a duty to refrain from it through California’s Unfair Competition Law (UCL)." Addressing Allergan's allegations in support of its UCL claim, FFC argues that:

Allergan's assertion that [use of a mail drop box in connection with running its business] is an unfair business practice . . . seems nonsensical, and their inclusion of what they think is a scurrilous photograph of the facility makes their intent questionable. The use of a private mail drop box is certainly not an unfair business practice, and such an allegation is absurd.

As for Allergan's assertion that FFC prepared a false proposed FDA filing for a hypothetical generic brimonidine tartrate/timolol maleate ophthalmic solution, FFC noted that its counsel wrote in a letter that "FFC is prepared to seek FDA approval via a Paragraph III ANDA filing to produce and market a generic brimonidine tartrate/timolol maleate ophthalmic solution with a Manufacturing Parter ("CMP") upon the invalidation of the Combigan Orange Book-listed patents" (emphasis in FFC's memo). FFC contends that its counsel "made it clear, via the proposed Paragraph III as opposed to Paragraph IV FDA ANDA submission, that FFC would not infringe on the '149 patent as long as it was valid."

Finally, with respect to Allergan's malicious prosecution claim, FFC argues that "[t]his is the most obviously sanctionably weak claim," stating that although "Allergan admits in its Complaint that an essential element of a malicious prosecution claim under California law is that the proceedings brought against the party claiming malicious prosecution must have been concluded in its favor," "[t]he face of the complaint establishes that . . . the civil proceedings at question [i.e., the IPR proceeding] have not been concluded at all, much less in Allergan’s favor."

FFC's motion will be heard on November 9, 2015. Patent Docs will continue to report on further developments in the case.

Comments

I find it amusing that FFC tries to argue, with a straight face, that its First Amendment right to petition the government is being impinged by this suit by Allergan. That right doesn't protect against "abuse of the process" which I suspect is what's happening with FFC's filing of an IPR proceeding. I do hope the California court nips this frivolous "motion to strike" in the bud.

The assertion of a state law SLAPP suit defense to a suit against an IPR petitioner is clever. Not something many patent attorneys would ever even think of. [And potentially appealing to a judge looking for a quick case disposal?] Most state SLAPP suits also have attorney fee recovery teeth. It will be interesting to see what happens. Is the appeal of this CA D.C. decision going to end up at the 9th Cir. rather than the Fed. Cir.?